Stocks Pounded Overnight but Dollar Slightly Lower

September 26, 2016

Investors are worried that there’s no escape from the low interest rate global environment, that such will corrode the health of the financial sector, that Donald Trump will be America’s 45th president, and that oil producers will lack the cohesiveness to support energy prices. ┬áThe first Trump-Clinton debate starts at 09:00 EDT tonight.

Led by weakness in bank and energy sectors, share prices are down between 1.1% and 2.2% in Germany, Britain, France, Italy, Spain, Switzerland and Greece. Japan’s Nikkei fell 1.3%. India’s market also dropped 1.3%. Stocks in China and Hong Kong plunged 1.8%.

Among 10-year sovereign debt yields, British gilts have declined three basis points, and German bunds and Japanese JGBs are three basis points farther below zero.

West Texas Intermediate oil prices did a dead cat bounce, rebounding 1.0% after Friday’s near-4% swoon. Comex gold is unchanged at $1,341.40 per ounce.

A downgrade of Turkish sovereign debt to junk status (Ba1) by Moody’s sent Turkish stocks 3.9% lower and depressed the lira by 0.7%.

The U.S. dollar otherwise slipped 0.2% against the Swissie and kiwi and by 0.1% relative to the euro and Australian dollar. The U.S. currency is unchanged against the Chinese yuan and 0.1% firmer relative to the loonie.

A bigger dollar move involves the Japanese yen, which rose 0.7%. Japan’s index of coincident economic indicators in July was revised lower to a reading of 112.1 from 112.8 reported initially. Such continues to show a “weakening” trend according to Abe government officials. While reiterating that the Bank of Japan will stimulate further if necessary, Governor Kuroda said a big change in the central bank’s bond buying is not contemplated for now.

On a brighter note, the German business climate index compiled by the IFO Economic Institute in Munich rebounded 3.2 points in September to a 28-month high of 109.5. Current conditions rose 1.8 points to a reading of 114.7, and expectations advanced 4.4 points to 104.5. Strong improvement was reported in manufacturing, construction, wholesaling and the retail sectors.

The British Bankers Association measure of mortgage approvals, totaling 36,997 in August, was the lowest in twenty months.

Italian retail sales slipped 0.3% in July, their first drop since April, and were 0.2% lower than a year earlier.

Finish producer price deflation slowed to 2.6% in August after having been negative 3.8% in July.

Czech economic sentiment in September was the highest since February. Business sentiment dipped marginally, while consumer confidence posted a more significant improvement.

New Zealand recorded a NZD 1.265 billion trade deficit in August, 16% greater than a year earlier. Exports and imports each declined on year.

Industrial production in Singapore was unchanged on month and 0.1% higher on year in August. Malaysian unemployment ticked upward to 3.5% in August.

The Bank of Israel is holding a monthly monetary policy meeting today. Next year it will switch to just eight meetings per year.

Ahead of tonight’s U.S. presidential debate at Hofstra University, polls show a race that’s too close to call but with momentum continuing to swing in Donald Trumps favor. The mood overseas is one of extreme panic at the mounting possibility that America is taking sharp turn away from well-established and predictable policies since the end of World War II.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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